Quick Facts

Ghana’s economic freedom score is 63.0, making its economy the 71st freest in the 2015 Index. Its overall score is 1.2 points lower than last year, with improvements in freedom from corruption and monetary freedom outweighed by declines in the management of government spending, investment freedom, and labor freedom. Ghana is ranked 5th out of 46 countries in the Sub-Saharan Africa region, and its overall score remains above the world average.

Over the past five years, economic freedom in Ghana has increased by 3.6 points. Along with an improvement of more than 20 points in its score for control of government spending, the country’s scores have advanced in half of the 10 economic freedoms including freedom from corruption and monetary freedom. These improvements have propelled Ghana into the ranks of the “moderately free.”

These steady advances, however, have masked deeper structural and institutional problems. Ghana remains well short of solidifying the foundations of macroeconomic fundamentals necessary for sustained growth and prosperity. Fiscal improvements have been overshadowed by the malinvestment of future oil revenues, forcing the government to seek IMF assistance in 2014. The judiciary is poorly funded and subject to bribery. Land titles are hard to obtain, and the process is lengthy, compromising the ability of individuals and firms to invest in their property.

Background

Ghana has been a stable democracy since 1992. Following the death of President John Atta Mills in July 2012, Vice President John Dramani Mahama became interim head of state. Mahama was elected president in December 2012. Ghana is rich in natural resources, including gold, diamonds, manganese ore, and bauxite, as well as oil. It is Africa’s second-biggest gold producer after South Africa. In 2013, Ghana deported thousands of Chinese nationals for illegally mining gold. Economic challenges include managing new oil revenue while maintaining fiscal discipline.

Successive governments have deployed robust legal and institutional frameworks to combat corruption in Ghana, which is comparatively less corrupt than neighboring countries, but few Ghanaians feel that the situation has improved. Scarce resources compromise and delay the judicial process, and poorly paid judges can be tempted by bribes. The process for obtaining clear title to land is often difficult, complicated, and lengthy.

Ghana’s top individual and corporate income tax rates are 25 percent. Other taxes include a national insurance levy, a value-added tax, and a capital gains tax. The total tax burden equaled 17.1 percent of GDP in the most recent year. Public expenditures equal 31.2 percent of gross domestic product, and public debt equals 60 percent of domestic output.

Recent regulatory reform measures have yielded reductions in bureaucracy, but progress in enhancing overall regulatory efficiency has lagged compared to other economies. Labor regulations have been under modernization, but informal labor activity remains significant. The government has reinstated a fuel-price adjustment mechanism to eliminate subsidies and has sharply increased electricity and water tariffs to reduce the fiscal deficit.

Ghana has an 8.6 percent average tariff rate. Government procurement procedures can favor domestic firms. Freely repatriating profits, foreign investors are typically treated equally with domestic investors under the law. The financial sector has undergone restructuring, and there are over 20 commercial banks. However, high interest rates on bank loans limit financing opportunities for new firms.